The Congressional Oversight Panel reported on Wednesday that most of the $23 billion in taxpayer funds provided to General Motors and Chrysler is unlikely to be repaid. The Congressional Budget Office estimated in June that taxpayers would lose $40 billion of the first $55 billion provided to the auto industry.

The Treasury Department acknowledges that most of the $23 billion provided by the Bush Administration is likely gone forever, but added that there is a "reasonably high probability of the return of most or all of the government funding" provided by the Obama administration.

No one likes a budget deficit, but run a deficit - - and a large one - - the U.S. must, and for two years, due to the depth and seriousness of the U.S. recession, so says an economist.

"We will likely have to run $1 trillion deficits for each of the next two years in order to provide adequate fiscal stimulus for the U.S. economy," economist David H. Wang told BloggingStocks Wednesday.

A large problem requires a large stimulus

What's driving the need for a large fiscal stimulus? The worst consumer and business demand conditions in more than 25 years, Wang said. "Every major demand factor in the economy...consumer, business, and capital investment, is retreating. The demand has to occur somewhere, and if the U.S. government does not create it, the recession with lengthen and deepen."

The U.S. recession, which began in December 2007, is already in its 14th month and there's no end in sight, based on leading economic indicators or economic fundamentals. One tell-tale stat: the job market. Or should one say, the 'non-job market.' ADP (NYSE: ADP) announced Wednesday that private employers cut another 693,000 jobs in December 2008. Meanwhile, many economists expect Friday's U.S. Labor Department job report to show a 500,000-job loss in December 2008. If it does, then the U.S. economy will have lost at least 2.5 million jobs in 2008.

Wang said continued monthly job losses above 200,000 would indicate to him "that the economy is entering a vicious cycle of corporate revenue declines, job lay-offs, decreased demand, leading to further corporate revenue declines - - that must be avoided."

"A billion here, a billion there, and pretty soon you're talking about real money."

To paraphrase the late Senator Everett Dirksen (R-Illinois), if a couple billion is real money, what's $400 billion amount to? Fiscal trouble for the United States, says an economist.

The U.S. federal budget deficit will double this year, to $407 billion, from $161 billion last year, the Congressional Budget Office announced Tuesday, in its revised baseline projection report (pdf).

The CBO said a weakening economy, spending for the Iraq and Afghanistan Wars and the War on Terror, higher entitlement spending, and a slowing growth rate in federal receipts are among the factors that will push the deficit to 3% of GDP this fiscal year, which ends September 30.

The deficit will rise to $438 billion next year, fiscal 2009, remain roughly at that level, $431 billion, in fiscal 2010, before tapering to $325 billion in fiscal 2011.

The CBO also expects U.S. GDP to grow just 1.5% in 2008 and slow to 1.1% in 2009.

Economist Glen Langan said the multiple $400 billion deficits are bad enough, but they could rise considerably, if the U.S. Treasury's bailout of Fannie Mae and Freddie Mac does not go well. "If the housing market does not stabilize in the year ahead, Treasury could end up spending tens of billions more per year," Langan said. "Nearly all of that cost would be born by the taxpayer, which means the deficit will increase."

A government bailout of Fannie Mae and Freddie Mac would cost U.S. taxpayers $25 billion over the next two years under a plan being proposed by the Bush administration, according to an analysis by the Congressional Budget Office.

The July 14th proposal by the administration would grant the Secretary of the Treasury temporary authority to purchase obligations and other securities issued by Fannie, Freddie and the Federal Home Loan Banks. Congress is expected to vote on the proposal soon.

CBO used historical data to estimate expected losses on the different types of credit risk the GSE's (government-sponsored enterprises) have in their portfolios.

The major public policy players in Washington appear to be lining up in support of a fiscal stimulus package to help jump-start the ailing U.S. economy.

Professor Emeritus David E. RePass of the University of Connecticut once said that, "Congress doesn't react, unless not reacting will result in the Congress bearing the wrath of the American voter."

In this instance, it looks like the Congress has heard about, or has at least taken the pulse of economic conditions in their home districts, and is set to act on a stimulus package. And, by all accounts, it looks like they may do it in near-record time. (The late writer Mark Twain would add here, "Famous last words.")

Fiscal stimulus: full speed ahead

House Speaker Nancy Pelosi, D-California, said she expects to introduce an economic stimulus package after she meets with President Bush next Tuesday, CBS News reported. Further, on Friday, President Bush outlined a proposed $140 billion stimulus plan, which will include tax cuts and other tax credits, The Wall Street Journal reported. In his statement Friday, Bush did not provide specifics, but lawmakers close to the White House said the administration is set to propose tax rebates of $800 and $1,600, for individuals and households, respectively, and is set to provide businesses with a 50% tax deduction for new equipment purchases, The Journal reported.